BoJ preview (July 2026): Focus on Governor Ueda’s "comeback": Japan Economics Focus

Research evidence excerpt

BoJ preview (July 2026): Focus on Governor Ueda’s "comeback": Japan Economics Focus

t at We expect the BoJ to keep policy rates at 1% when it holds its next monetary policy meeting

the July meeting, while revising (MPM) on 30-31 July. In the quarterly Outlook Report, we look for upward revisions to the

up for growth and slightly down growth forecasts, especially for FY26, due mainly to AI-related demand, progress in alternative

for inflation only for the current procurement and the effects of fiscal policy, although references to elevated uncertainty will

fiscal year likely remain following the resumption of Middle East hostilities into July (see below). We

expect the inflation projections to be revised down only for FY26 based on actual data (see

below). On the heels of a hike at the previous meeting, a hold is considered almost certain this

time around. Given the continuing rise in inflation expectations and the outlook for accelerating

inflation from July onward, and also to restrain the historically weak JPY, we expect the BoJ to

maintain its vigilance around upside risks to underlying inflation and signal a forward-looking

stance toward future rate hikes.

Annual wage negotiations First, we summarize the economic and inflation environment since the last Outlook Report in

produce large hikes, including for April. There have been many positive factors on the economic front. One is that wage hikes were

SMEs; strong wage growth also solid again this year. In the final JTUC-Rengo tally of the “shunto” spring wage negotiation

continues in the Monthly Labour results, released on 3 July, hikes came to an average of 5.01% (of which base pay: 3.50%),

Survey marking a third consecutive year at 5% or higher (Figure 1). Although this was somewhat below